Fed Mulls Shift in Bond Buying Program: FOMC Decision-Day Guide
Federal Reserve Chair Jerome Powell and his colleagues, facing an economy slowing as the Covid-19 outbreak worsens, are considering whether to alter their asset purchase program to provide more support for growth. . .
Economists say the Fed may deliver fresh guidance on its asset purchases, now $120 billion a month, tying how long the buying will continue to substantial progress in meeting its goals of full employment and 2% inflation. That would be a stronger commitment than the existing pledge to maintain purchases “over coming months.”
Market Reaction
The decision on asset purchases is likely to affect trading in Treasury securities. A failure to extend the maturity of Treasury buying or increase purchases could help to lift the 10-year Treasury yield to 1% or higher.
Since late March the 10-year yield has moved between 0.5% -- a trough reached in August -- and just under 1%. It nearly broke this upper barrier in the first few days of December, after a tepid employment report lifted hopes for more government spending as virus cases mounted.
What Bloomberg Economists Say...
“Bloomberg Economics does not expect the central bank to lean further on policy-accommodation levers at the December meeting, but the risks are tilting in that direction in the near term.”
-- Carl Riccadonna and Yelena Shulyatyeva (economists)
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